Credit deflation and the reflation cycle to come (part 2)

[Harley]

On 08/04/2021 at 20:43, DurhamBorn said:

Telefonica SA Brazil ADR and TIM SA ADR are the two to concentrate on ,not buying advice etc.Tickers VIV and TIMB

Not buying advice but TIMB looks interesting.  PITA regarding yield as each data source gives another figure for both the US ADR and the underlying.  One source gives 4.33% for the US ADR while another source has it as 2.74%.  Also comparing financials on the ADR to the underlying on the Brazil exchange is messy.  For example, the ADR shows flat OCF but the underlying shows a nice YOY increase.  Is that all just down to currency effects?

[Harley]

2 hours ago, M S E Refugee said:

What do people think of Cement Producers in the coming reflation cycle?

I am building a position in Steppe Cement at the moment and I also like LafargeHolcim.

I likee.  Have/had some Chinese, etc ones.  Might be seeing some new action on the monthlies.  Last I looked the European ones were expensive.

[Harley]

2 hours ago, CVG said:

I just logged back in and everything is back to normal! Luckily I took a screenshot to prove that I wasn't going mad.

This is great preparation for how you will feel after the BK. It's just that I was anticipating 80% - not 97%. It is also good to know that my punt on AT&T was indeed the correct choice!

At least TradingView seemed to have sorted out their sh*te and are now showing the correct data on their charts!

[jamtomorrow]

2 hours ago, M S E Refugee said:

What do people think of Cement Producers in the coming reflation cycle?

I am building a position in Steppe Cement at the moment and I also like LafargeHolcim.

I really fancy basic building materials for a fiscal inflation - governments love civil engineering projects, Biden's infrastructure stimulus is only the start.

I already own CRH, and Heidelberg and Lafarge are on my BK shopping list. Maybe something like Breedon if you fancy an AIM flutter.

[Harley]

Just listened to:

I've always liked Mr Faber but never subscribed.  Is his newsletter worth the $300 pa?  I've seen some very old ones and looks quite well written.  I'll ask for a more recent sample.  He is looking and sounding a bit older these days which is sad to see.  My world is changing around me!

In summary on this one:

. TLT 10 year UST may turn up soon

. PM miners same

. PMs, gold and platinum same but BTC impacting gold (watch out if BTC falls)

. Per Napier, think about diversifying assets across juristictions

 

[Harley]

12 minutes ago, jamtomorrow said:

I really fancy basic building materials for a fiscal inflation - governments love civil engineering projects, Biden's infrastructure stimulus is only the start.

I already own CRH, and Heidelberg and Lafarge are on my BK shopping list. Maybe something like Breedon if you fancy an AIM flutter.

Many have done well in the last year and are in the overbought zone on the monthlies.  But they have just entered that zone and could go higher if they break longer term resistance.  For example, LHN is up 56% for 1Y and now back at its 2017 high which is a long term support/resistance level.  Like many other stocks in this situation their MACDs have not moved much so maybe further to run?  LHN yield is currently 3.53% which is not bad (but WHT is 35%?).

[BWW]

Who else here is holding KAZ [copper FTSE]?

Friday the kaz oligarchs announced they have 82% so it will delist in May.

Choice is become a private shareholder [in bed with oligarchs - I think not for me], accept the offer of 850 [AFAIK that will again become available] or sell on open market, afaik - anyoone confirm ?... closed Fri at 868.

I have ca 15k, it owes me 12 [already took 3 profit in an isa so tax free yay]. Don't think I want to hold even though I suspect its worth 25-40k. Sell now or hold on a bit for other would be private investors to bid it up?

Am inclined now to exit but maybe wait until end week if my above list of choices is correct.

[leonardratso]

18 minutes ago, BWW said:

Who else here is holding KAZ [copper FTSE]?

Friday the kaz oligarchs announced they have 82% so it will delist in May.

Choice is become a private shareholder [in bed with oligarchs - I think not for me], accept the offer of 850 [AFAIK that will again become available] or sell on open market, afaik - anyoone confirm ?... closed Fri at 868.

I have ca 15k, it owes me 12 [already took 3 profit in an isa so tax free yay]. Don't think I want to hold even though I suspect its worth 25-40k. Sell now or hold on a bit for other would be private investors to bid it up?

Am inclined now to exit but maybe wait until end week if my above list of choices is correct.

yeah ive got a small amount of them, its up 25% as of friday, isnt it 868 at the mo cos they are offering 850+some special divi, i did know when they offered it via a corporate action but i didnt vote on it, i might flog it off next week i reckon - have to take it out of my regular buys now as well, pah, was hoping their takeover would fail or someone else would pip them and cause a bidding war, theyll probably get it now.

[DurhamBorn]

3 hours ago, Harley said:

Not buying advice but TIMB looks interesting.  PITA regarding yield as each data source gives another figure for both the US ADR and the underlying.  One source gives 4.33% for the US ADR while another source has it as 2.74%.  Also comparing financials on the ADR to the underlying on the Brazil exchange is messy.  For example, the ADR shows flat OCF but the underlying shows a nice YOY increase.  Is that all just down to currency effects?

Currency and the way they declare divis,they are yielding 5% on the ADR at the moment i think,Telefonica about 7%.

TIMB have net cash,no debts,i think Telefonica is the same.They are using the cash to buy Oi Groups mobile business.Iv been buying both heavily.I bought some Card Factory at 33p they got sold last week,that went into TIMB and i sliced a few other companies.I want a few more of both,but iv set two ladders rather than simply buy all at these levels.

I think the whole industry outside of the US is structurally undervalued.

[Barnsey]

 

[JMD]

6 hours ago, feed said:

if you go back to the founding fathers it's not democracy.  Because slavery.  

But, i think you need to look at Napiers point about when we really got democracy. The post war era.

Obviously 71 is key, but it was a result of 44, it was inevitable.  The demand on dollars would always overwhelm it. Keynes said as much in 43 i think.  44 was politically expedient at the time, the US was half of the worlds GDP, but it started us down the road of soft currencies.  

i don't know if the world needed democracy after the horrors of the wars and soft currencies were an answer, or it was all a series of unintended consequences after the US took on the roll of the reserve currency.  

but, as always there is that elephant in the room for the late 20th that comes into play. 

Oil.

The anthropologists have a theory, and i'm grossly over simplifying it here, it goes cultural complexity increases with the availability of energy. Such that the greater the abundance of cheap energy the more complex a societies culture will be. 

The US has had more or less free energy for the last 50 years, due to it's reserve status, soft currencies and it's hegemonic dominance.  Democracy and the cult of the individual is an incredible complex and diverse culture. Very difficult to maintain without an abundance. It's a culture that may influence the globe, but certainly isn't universal.  Good luck trying to find trans-waffle in sub Saharan Africa.  

There is a relationship, between cheap energy, soft currencies and cultural complicity & democracies.  I have no idea how they are linked, what leads what or how they move or align.  But, fiat is in it's death throws, energy is about to get much more expensive - which i think leads us back to where most of humanity has existed.

Homogeneous, hard currency controlled societies. And most human societies have been feudalistic some sense, we are hierarchical animals.  Only this time we've developed technologies for control beyond the comprehension of our ancestors. 

And i don't think crypto's are the answer, it's availability is just as much a function of energy, maybe even more so.  And even it is the basis for a hard currency, then it's the owners setting the rules, a new elite, which isn't democracy.  

But these are just my half formed thoughts.  More than happy for someone to explain why it's utter nonsense.   
 

You say '...not democracy. Because slavery.' (!!!) Well yes, my whole issue with democracy is that it is a busted flush, but not because of that unsavoury slavery point you make btw. Politicians love to talk about extending the franchise, it's all so meaningless imo. Anyway thanks for your response, but discussion obviously not for this thread.

[DurhamBorn]

To save democracy longer term they need to abolish the welfare state and replace with a Universal Basis Income alongside a land value tax.It needs to be set lower than welfare benefits now so that you can only live a very frugal living on it.The thing that stops it coming in is housing.To counter that the state needs to build lots more housing with shared facilities.The state should pay zero rent to private landlords.

The state is making people poor by choosing who it gives resources too.An example only today.My neighbour has retired from the police,looks very young,55? and has used a pension lump sum to give his daughter a 50% deposit on a house.He will be getting a massive tax payer funded pension now.

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

[Harley]

2 hours ago, Barnsey said:

 

I think she's right.  Both demand and supply point to higher prices in the immediate term. These tend to be very sticky going down so I expect them to more or less stay at their new level or rise and margins to increase via cost reduction and any fall(?) in material prices.  Reminds me of Germany moving to the Euro when there was one big hit in higher prices.

Many companies have marginal lines of business, plus we have the zombies who are susceptible to a solvency crisis which is highly likely despite all the liquidity. The winners will have pricing power and the focus may be on the quality of earnings.  Then we've had so much hidden inflation such as shrinkflation this is a time to rebase prices.  Too good an opportunity.

I guess their hope is we have a rebase, a plateau in prices, and then the inflation falls out the numbers over time.  Even then, if so, everyone will take another, more concentrated cut in living standards, unless they finally have labour power for some reason, but too much WFH makes people's jobs more vulnerable. 

I see no real growth, just like the past few decades, without a war and/or other form of destruction.  This means increasing poverty, as has been the case for a while now, with certain sections of society taking an increasing size of the pie to compensate and increasing authoritarianism to make this possible.  A phoney war on say climate change or a pandemic to me mirrors the Nazi regime building all those autobahns, etc which gave a fake boost but ultimately had to be paid for by Lebensraum and war.

Now deflation in asset prices is a whole other story and I can't see the discounted value of future earnings (their absolute value and the discount factor used) being helpful, plus money will be needed by all to live and by the increasing number of retired and unemployed.  There's always some action though but you'll need to be active not passive once this melt up finishes and the fire brigade has gone home.  

Just my going in assumptions and the basis on which I'll proceed.  Portfolio wise, for me this is a time to get asset allocations nailed down.

[feed]

Lyn today

 

Talks about the inflation vs deflation at around the 41 minute mark, if you don't time for the full hour.

But worth the time as always

 

[goldbug9999]

30 minutes ago, DurhamBorn said:

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

This is the telling point, its the productive sector of the economy - private enterprise, which is rewarded the least in our current system. 

[Harley]

7 minutes ago, goldbug9999 said:

This is the telling point, its the productive sector of the economy - private enterprise, which is rewarded the least in our current system. 

A ship with too many barnacles makes little progress and presumably will ultimately sink.

[BurntBread]

8 minutes ago, PrincessDrac said:

Do you think we are at the bottom with Gold and Silver.

Nobody knows.

If I were to try to channel the spirit of the thread, I think the conclusion would be that gold and silver, and more pertinently the PM miners, may go either up or down form here in the short term. However, in the event of a BK, PM miners are expected to be temporarily below their current valuations (David Hunter suggests a possible 30% fall), before beginning a long (and bumpy) ride up again to new highs. DB has a target price for silver of $200 to $250 per ounce by the end of the decade. David Hunter has said similar, and has mentioned a figure for gold of $5000 per ounce, again later in the cycle.

All that is conjecture, though.

[Harley]

27 minutes ago, PrincessDrac said:

I'm long on Gold and Silver now.

I bought some Fres stock yesterday. Probably my last buy at £9 a share. I hope they don't fall further as they dropped to 8.83 after my purchase.

Heads up as they have a 10% withholding tax on the dividend payout.

They go ex dividend soon. I think the 20th of this month.

Gold and Silver seem to be on the rise. If next week the inflation figures in the US are notching up. So the bond yields start also ticking higher to compensate.

Gold and Silver then falls. Where does this end. I'm long on PM's. Hoping to match inflation figures. Yet my miners, Fres, Poly, CEY, HOC are all on their asses.

Do you think we are at the bottom with Gold and Silver.

Next week may well spell out the answer to my question.

 

I was looking at UST 30Y yields today and was going to post they look a bit toppy on a technical and chart pattern basis.  I haven't looked at the shorter end yet but Farber said he liked the 10Y.  PM miners sre getting interesting for me as value plays and several commentators are bullish.  Someone just bought a large chunk of Barrick.  But everything could/would get wacked in a BK.  The metals are a harder read.  Bitcoin could be due a pullback, although I see it as complimentary (a bit like the gold:silver ratio).  PMs could do one more big drop as a shake out but surely remain a good long term play, if held correctly!

[Bricormortis]

I work on the assumption that PM miners go down 80 to 90 % in a BK based on I am a pessimist and they are muvverfuckers. They will do much worse than the underlying metal which I expect to get whacked 50%  but be one of the first things to rebound.

[sancho panza]

Interesting exchange on Twitter

Price of wood has been mentioned on here a lot lately.

 

here's a close up of the chart

 

[sancho panza]

On 09/04/2021 at 13:07, DurhamBorn said:

@sancho panza its incredible how that article says the same thing as the macro showed.I think the very first post on this thread or the original one i said the economy cant produce enough for the claims on it,and thats exactly what that article is saying.They are seeing the same thing through energy being the primary source of growth.

My roadmap has shown how they would proceed because the only way they will see is to inflate.Each individual country needs to get ahead of the curve now,and the market doesnt understand that yet.

Here in the UK the huge problem they have is that massive parts of spending are inflation linked,and that defeats the purpose,so benefits and state wages and pensions need putting up less than inflation and even better less than inflation that is already understated.

I would say the key thing to think about here is this.

"poor" people in this country get to consume incredible amounts of "stuff" they havent swapped effort for.So do the rich.

You can see how this plays out as certain workers,for instance council managers,the police etc force through higher and higher wages and pensions and take more and more from the private worker,or saver.

Money has pretty much now lost any hope of holding value,and that value is actually someones labour.Its supposed to save the getting up at 5am,the going to work when ill,the putting up with wanker bosses,getting soaked in the car park,missing your sons football game,your daughters nativity play,your partners hospital appointment

Most blame central banks,i blame government,but both are needed to carry on the theft.

My model shows they need around 65% inflation to stop western governments going bust.Most of that theft then comes from bonds then cash as they run rates way behind.Of course that also hits many other areas,pension schemes etc so divis have to be cut.

That is why i measure success or failure on that 65% number.If i increase my assets from last Feb before the crash (first crash maybe) by 65% or more thats success,less is failure against the system and cycle.

 

What I find intriguing is that you(and other Macro commnetators like DH) and Dr Tim have reached similar conclusions through very diffferent methods/reasoning.

For me the harderst adjustment of the last decade has been learning that CBs will be mad enough to do the things that mad people shouldn't be allowed to do.And that when I was sat there looking at the bloating of CB balance sheets worldwide,the BoJ buying ETF's(wtf!!!),the BoE printing £250bn in 2020 tax year whilst govt issued £270bn new detb etc etc and thinking it was mad,I wasn't insane,I was normal,rational and possessed of my faculties.

I've done some hard thinking about alcoholics/bullies/druggies and their enablers thsi last week and I've been trying to work out who's worse.In my view,the enabler ie the BoE shares a dsiproportionate responsibility for where we are.Politicians will always chase easy solutions,the CBers are meant to be more educated and ahem........'independetn' than that.

 

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

 

[Hancock]

27 minutes ago, sancho panza said:

Interesting exchange on Twitter

Price of wood has been mentioned on here a lot lately.

 

here's a close up of the chart

 

Price of land will have to come down, to compensate.

[Hancock]

43 minutes ago, sancho panza said:

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

So politicians don't have to take the blame when things inevitably goes tits up ... see SAGE/Covid for a more recent example of needing somewhere to pass the blame.

We live in a cover your arse society on steroids, and Brits have created an economy on needing to cover ones arse.

The work i do, could, in a once in a lifetime extreme case, be a matter of life and death for hundreds of people if not done correctly.

But it doesn't matter if dozens die, just so long as i've the paperwork in place to show all was good and any fuck up is nowt to do with me or the company i work for. But i'm good at paperwork, and know how the job should be done, which usually differs from how i'm being told to do it ... as the people telling me how to do the job have never actually got their hands dirty and done it!

So too play games, i like to send a few emails to make sure the companies and the clueless cunts on the beach have their backside hanging out like a fucken baboons!

See Deepwater Horizon for a lesson in failing to cover ones arse.

[Noallegiance]

37 minutes ago, sancho panza said:

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

 

The question I would ask is 'Why are they not exercising it?'

Whilst I disagree with the  course of monetary action taken over the last several decades, if I came to you and and gave you a "choice" between cake or death, which would you "choose"?

For any reader, to complete the thought process:

Of course, there is no choice to be made. The course of action leading to the two available paths of cake or death has already happened and cannot be undone.

Cake, it is. Until the cake runs out.

Independence of any individual or body is irrelevant when choice is removed. It's the poisonous beauty of socialism.

Governments are, in my opinion, entirely at fault for our economic predicament.

A market of individuals could never create such an all-encompassing mess.

[JMD]

6 hours ago, DurhamBorn said:

To save democracy longer term they need to abolish the welfare state and replace with a Universal Basis Income alongside a land value tax.It needs to be set lower than welfare benefits now so that you can only live a very frugal living on it.The thing that stops it coming in is housing.To counter that the state needs to build lots more housing with shared facilities.The state should pay zero rent to private landlords.

The state is making people poor by choosing who it gives resources too.An example only today.My neighbour has retired from the police,looks very young,55? and has used a pension lump sum to give his daughter a 50% deposit on a house.He will be getting a massive tax payer funded pension now.

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

Yes paying taxes into a system that then pays huge amounts straight back out to masses of unproductive/unemployed people, is one glaring example of so many, of why for me I consider that the 'social contract' has been broken, and why I think that democracy itself has now failed. First prorogation, then lockdowns, what next? (rhetorical question, we all kinda know what's coming)                                                                     DB, you mention land-value tax policies - I think these could be operated to make land speculation unattractive, is that what you mainly meant? That is to say I don't think they would raise much in terms of being a wealth tax because the wealthy would find ways of 'hiding' property, for example tracts of land could be utilised as working farms/forestry(for lumber) and put in trust for next generation to inherit. Anyway isnt most wealth of the rich held in stocks and company ownerships?                                                                            Collecting all taxes is a difficult problem to crack. But if we do get more authoritarian government (not wanting this, but think it inevitable), and the West collectively for example were to make all foreign bank accounts transparent along with operating strong capitol controls, I wonder would such government oversight of the money flows coming in/out of the country stop most tax evasion, by pulling the rug from beneath offshore tax shelters?